Trade negotiations post–Brexit vote dictate Sterling’s position

Since Trump’s election, we have seen Sterling rally against the majority of currency pairings. This was due to his stance on trade negotiations with the UK following Brexit. He has indicated his willingness to act accommodatingly and decisively. This bodes well for the Pound knowing that the World’s biggest economy is not going to be problematic in getting trade deals put together.

Theresa May played a smart hand by not lambasting Trump during his campaign where many other world leaders did; this has put her in a strong position to keep up the UK’s special relationship with the States.

We saw a trough for Sterling this week following the news a leaked memo stated that the UK was far from prepared for an EU exit, with 30,000 additional civil servants required for the departure. Yesterday Theresa May stated the report was fallacy and Sterling rebounded.

Inflation a Major Concern for the UK Economy

Following the UK electorate’s decision to vote to leave the EU the Pound has fell significantly in value. This has pushed the cost of exports up and will in time rear its head as prices rise for the consumer.

This is issue is not to be underestimated with some economists predicting a rise of up to 2.7% by the end of Q1. With wage growth unable to keep up with inflation it does not bode well for the UK economy and the average household will have to tighten its strings.

Will the possibility of a soft-Brexit lengthen trade negotiations?

With the initial ruling that the government must now vote on whether to invoke article 50 and the subsequent Supreme Court hearing to follow on 5th December there could be substantial delays in the EU exit process which is not good news for the Pound. Throw into the mix Nicola Sturgeon who wants Scotland to have influence on the decision and we could have long period of uncertainty on our hands. If you are selling Sterling, it may be wise take advantage of the current spike.

Retail Sales data could cause volatility

Today at 10.30 is the release of UK retail sales. The general consensus is that there is set to be a slight increase in retail sales which may see the Pound gain some strength. The market reacts to rumours as well as fact so to some extent this data may be filtered into current rates. If data goes against the grain however expect larger swings.

I personally would not take the risk of trading after this decision and would take advantage of current levels. Email me here if you would like to arrange a free quote.


Read more articles
Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.